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Is the US Trade Deficit Destroying Jobs?

"Trade deficits aren't economic indicators of cheap goods. Trade deficits are indicators of lost jobs," said Leo Gerard, international president of the United Steelworkers. "If you don't have a job, it doesn't matter how cheap the stuff is."

American labor and industry officials on May 18 blamed unfair foreign competition for destroying U.S. jobs, something President Donald Trump has railed about repeatedly.

But in response to the administration's call for comment on the causes of the U.S. trade deficit, economists and industry groups stressed that trade is beneficial and creates jobs throughout the economy, even if some are lost locally.

The influential U.S. Chamber of Commerce said the trade deficit is not "an appropriate gauge of whether a particular set of trade policies -- or trade agreements -- is delivering benefits to the American people more broadly."

"It would be mistake ... to assume a link between the U.S. trade deficit and U.S. employment," it said.

But the anecdotal stories of pain caused by trade are compelling and play into the Trump administration's aggressive stance on trade policy.

A hearing on May 18 on the trade deficit came the same day the administration officially announced it will renegotiate the North American Free Trade Agreement, and launched yet another trade dispute with Canada over subsidies allegedly provided to aircraft manufacturer Bombardier.

'Lost jobs'

"Trade deficits aren't economic indicators of cheap goods. Trade deficits are indicators of lost jobs," Leo Gerard, international president of the United Steelworkers labor group, told the hearing. "If you don't have a job, it doesn't matter how cheap the stuff is."

The hearing was called by the Commerce Department and U.S. Trade Representative as part of a study on the U.S. trade deficits, especially the impact of factors like tariffs, harmful subsidies and other unfair practices.

Officials from a variety of industries from pipes to coal complained of laid-off workers, declining wages and shuttered and relocated factories.

Kathie Leonard, president of Auburn Manufacturing Inc., which produces heat-resistant amorphous silica fabric used in high-temperature jobs like welding, said defense contractor clients who are not covered by buy-American regulations were buying cheaper Chinese imports.

Roddey Dowd, president of the Charlotte Pipe and Foundry Co., said unfairly cheap imports from China's state-owned and subsidized metal-casting industry helped drive the American manufacturing base down to 1,956 facilities from 2,800 in the last 17 years, representing a loss of 60,000 jobs.

Borrowing to Buy

But economists and industry representatives pushed back against the anti-free trade message and the focus on the deficit.

The U.S. Chamber noted that, "By definition, the U.S. current account deficit results from Americans consuming more than they produce."

Joseph Gagnon of the Peterson Institute for International Economics, a research group, said trade deficits are caused by borrowing from other countries."The overall trade deficit reflects our net borrowing from the rest of world," he said, and the Trump administration's plans for a fiscal expansion would widen the trade deficit.

Linda Dempsey of the National Association of Manufacturers downplayed the impact of trade deficits. "Trade deficits increase as the U.S. economy grows and fall during periods of economic weakness," she said. "Unemployment goes in the opposite direction."